The UK consultation on VAT grouping

The UK tax authorities have initiated a consultation on the current VAT group rules.

30 December, 2016


The aim of this consultation is to determine whether further changes should be made into the current rules based on ECJ cases Skandia and Larentia+Minerva.

The main focus of the consultation is to review the eligibility requirements to become a member of a UK VAT group and assess the impact and policy changes after regulatory developments following the Skandia case.

The current rules only allow body corporates to become members of a UK VAT group. Following Larentia+Minerva cases (C-108/14 and C-109/14), the ECJ indicated that Member States may not restrict VAT grouping to entities with legal personality unless it is justified by abusive practices and tax avoidance. HMRC is now willing to hear from businesses about the risks and opportunities of different scenarios after widening VAT grouping to other entities.

HMRC also wants to receive information about the impact of the Skandia ECJ case. Following this ECJ decision, supplies between a foreign permanent establishment and its VAT grouped head office may be subject to VAT. Their former VAT treatment was out of scope of VAT, hence these changes can have a significant financial impact, particularly for partially exempt businesses. The consultation aims to receive further views on the impact of these changes, including real life examples and suggestions from taxpayers.

The UK voted to leave the EU last 23 June 2016, however, until the exit becomes effective, the country remains a full member of the European Union. You can read more about the VAT consequences of Brexit in our website.


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